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UK supermarket giant takes on banks

Britain's biggest supermarket takes on the high street's banking giants as it launches its first current account with a swipe at the "ridiculously poor value" offered by rivals.

Tesco Bank says it wants to avoid the "smoke and mirrors" such as charges and introductory offers used by others, with an account that offers three per cent interest on balances but will charge a STG5 ($A9.13) fee unless holders pay in STG750 ($A1,368.99) a month.

It will target the six million existing customers who already use its savings, insurance and loans - which include mortgages - but has its parent supermarket's 16 million Clubcard holders also in its sights.

Chief executive Benny Higgins said it would bring a "fiercely competitive" customer focus from the retail sector which did not exist in banking.

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It is thought if it achieved the success of Tesco's credit card business it would match banking giant HSBC - which together with its First Direct brand has just over nine million UK current account customers, representing a 13 per cent market share.

If its current account numbers were to match HSBC, it would be rubbing shoulders with the big four that dominate personal current accounts, which also include Royal Bank of Scotland, Barclays and Lloyds Banking Group.

Tesco says its new account offers simple and transparent fees and charges, and that its status as a challenger bank stands up well against rivals because of its scale, full-service offering and independence from bigger lenders.

"It is a market dominated by smoke and mirrors and we have tried to be as transparent as possible," Mr Higgins said.

"The vast majority of current accounts are languishing with ridiculously poor value.

"There is still very little switching taking place in the UK and it's because people think that all the banks are the same."

Deposits will be able to be made at more than 300 Tesco stores in the same way as they currently are by savers, but the new accounts can only be opened online, though with the option of telephone support.

Tesco launched its bank as a joint venture with RBS in 1997 but took full control of the business in 2008.